Certara(US:CERT)2025-08-06 22:00Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $104.6 million, representing a 12% year-over-year growth on a reported basis and 10% on a constant currency basis [22] - Total bookings in Q2 were $112 million, an increase of 13% from the prior year period [22] - Adjusted EBITDA for Q2 was $31.9 million, up from $26.3 million in Q2 2024, with an adjusted EBITDA margin of 31% [26][27] - Net loss for Q2 2025 was $2 million, compared to a net loss of $12.6 million in Q2 2024 [27][28] Business Line Data and Key Metrics Changes - Software revenue was $46.7 million in Q2, a 22% increase over the prior year, with organic growth of 9% [23][24] - Services revenue was $57.9 million, up 5% year-over-year, with strong performance in QSP and SIMP businesses [25] - Software bookings were $46.6 million, an 11% increase from the prior year, while services bookings were $65.4 million, a 15% increase [24][25] Market Data and Key Metrics Changes - Large pharma companies are cautious due to geopolitical and macroeconomic factors, affecting decision-making timelines [8] - The biotech funding environment has slightly improved but remains below historical trends [8] - Approximately 50% of new QSP projects this year have been for monoclonal antibody therapies, indicating a shift towards non-animal testing methodologies [15] Company Strategy and Development Direction - The company is focusing on expanding its AI-enabled MIDD platform, with plans to launch Certara IQ in Q4 2025 [12][13] - Continued investment in R&D is a priority, with a focus on integrating AI with existing modeling technologies [11][12] - The company aims to solidify its leading position in model-informed drug development through strategic acquisitions and product launches [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the financial outlook for the remainder of the year, supported by solid bookings trends and high visibility into renewal dynamics [20] - The company is optimistic about the growing interest in model-informed drug development, which is expected to drive future growth [20] - Management acknowledged the mixed spending environment but noted persistent customer interest in biosimulation technology [8] Other Important Information - The company received EMA qualification for its SimChip modeling platform, marking a significant regulatory milestone [10][61] - A $100 million share repurchase program was authorized, with $25 million already purchased [29] Q&A Session Summary Question: Is the multibillion dollar addressable market opportunity incremental to the low single digit billion TAM for biosimulation software? - Yes, it is considered an additional opportunity [32] Question: What is the interpretation of the QSP responses in the recent webinar? - QSP is a growing area, and the company expects the ratio of users to increase over time [35][36] Question: Can you provide insights on the demand drivers for software versus services bookings? - Demand for software is driven by R&D infrastructure needs, while services have seen a resurgence due to high demand for QSP services [39][41] Question: What are the dynamics across customer tiers, particularly between tier one and tiers two and three? - Tier one experienced timing-related slowness, but there is confidence in achieving renewals in the second half of the year [42][43] Question: How should customers think about adopting the new AI MIDD platform? - The platform aims to unite various software solutions, enhancing decision-making in drug development [47][49] Question: How does the EMA qualification for SimChip differentiate the product? - It provides prequalification, enhancing consistency and reducing uncertainty in the review process [60][62] Question: What is the expected impact of FDA guidance on animal testing on new customer inquiries? - There has been an uptick in interest, particularly in QSP and CIMSIP, but it is expected to be a long-term conversion [73][74] Question: What are the factors leading to a step down in margins in the second half of the year? - Increased hiring and investments are expected to impact margins, with Q2 margins serving as a good proxy for future performance [87][90]